I believe that 'ring' (#8), combined with the clamps seals the pipe ends together. If it is leaking around the joint, perhaps the clamp fasteners have failed. I've had the fasteners give out before the pipes in that sort of setup before.
Maybe you can get away with less $$.

Also, check the hangers. Perhaps the joint was stressed for lack of support.

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1986 300E 5-Speed 240k mi.